[USER]

My husband and I met with a Certified Financial Planner today. He suggested that we consider diversifying into the area of private equity/private debt as accredited investors.

I’ve taken most of the afternoon researching on my own, but would love your insights regarding the pros and cons of private equity/private debt versus staying the course of stock market investment.

Also, how do I choose a private equity firm?

[Jean]

How much do you currently have invested and what is your time horizon?

[Asodike]

Keep it simple S/p 500 , VTI and treasury Bonds depending on your age, it’s not necessary making it complicated

[Ræ]

We dabbled but the fees wrecked our returns. Granted, we were newbies, but it was a waste of time for us.

[Angie]

Was your financial planner a fiduciary? Only a fiduciary is obligated to give you advice in your own best interest.

Everyone else can tell you to do something that makes them money, even if it sucks for you.

[Steve]

Question to the OP. What’s your net worth? If we’re talking upwards of $30-50M then probably can take a look at private equity.

[Kurt]

It’s a good question and fair to ask. But it is very difficult for someone to give you good answers without knowing a lot more, and without writing a twenty page answer about PE and credit.

Those are both such diverse areas- one example would be in private equity you can do small local things, huge global things, sector specific funds, evergreen funds with quarterly liquidity and funds that won’t likely return dollars for 7 or 10 years.

I’d agree with one comment that at 1.25m you probably don’t need to have an illiquid investment at least – perhaps look to invest in a publicly traded stock that’s main business is PE or private credit.

Sorry. Just a lot to learn in these complex areas. Some are awesome. Many are junk. And there are just so many varieties.

If it interests you, my advice would be take some time and just look at a ton of stuff before committing.

Good luck!

[Dan]

I was put into BCRED at Morgan Stanley, and have been happy with it – yielding 10% for awhile now.

That said, there are good public options in BDCs (MAIN, ARCC etc) that are solid long term dividend payers.

I definitely think they have a place in a portfolio as long as the fees are reasonable- good yield and low correlation to the S&P 500.

Some private funds have crazy fee structures, so you need to be careful.

[Sarah]

What was the reason the advisor recommended private equity, because you are ultra rich? Or because he thinks the stock market is going to crash?

From what I understand private equity is not an investment advise given to masses, it’s a play for the ultra rich with multi millions

[Molly]

I lost a bunch trying that…they had no fiduciary responsibility required, charged borrowers really high interest, many deals were foreclosed with losses and getting out of it has been practically impossible…so…I don’t recommend them

[Sandy]

Private funds can be very expensive, lack liquidity and can be a pain for tax filing. sometimes the returns will justify all of this but in my opinion not often.

The best funds have extremely high minimums and may not be available to the ordinary investor.

[Destin]

Just my personal experience… My parents purchased some private RIETS and they were extremely illiquid.

Meaning without a buyer you wait and hope they go public and not bankrupt.

[Neha]

If you enjoy research and are not afraid of complexity then look at Paul Merriman’s 4 fund portfolio. Lots of educational videos on youtube.

This will reduce your volatility to a level you can tolerate and has historically done 1% or so better than then s&p 500 over the long term.

[Susie]

We moved into some RE syndications and mineral royalty acres to diversify out of the stock market. It is more risky than an index fund, it carries a similar risk to a single publicly traded company.

But corruption can be anywhere. We are heavily in stocks and wanted to have some other investments.

I wouldn’t do it unless you have a desire to learn and research.

Plus, you need to be capable of interviewing these companies that you are partnering with.

It is similar to buying a single stock without the SEC.

[Allen]

I have been in a number of these. Some with private people, some through brokers. Some did fantastic. I lost everything in others.

The ones through brokers and advisors were the terrible ones, because the fees are profits whenever they occurred.

Accounting expenses are also more complicated. If I had to do it over again, I would have put Everything in sp500.

The more Financial engineering, —the more people involved, the more fees, the less accountability, the less liquidity.

If it were so easy to make money with this system, they wouldn’t want to have you involved.

[Tom]

You don’t need to do anything different to go from $1M to $5M than you did to go from $100K to $1M.

You don’t need to get complex just because you have “more”.

[Mutdosch]

Your advisor is giving you good feedback. Your looking for companies to invest in not funds.

These opportunity not as easy to find but they are out there.

[Wilson]

Depending on your risk tolerance
– you could also invest in public stocks that are private equity like Apollo, Blackstone, KKR, etc – just fyi that these are already in S&P 500 but your increasing your exposure.

– in past I did invest in private debt through platforms like peerstreet. They did go bankrupt and I got most of my money back but there could be some value in being a private lender

– individual private deals but these need the proper due diligence in understanding risk, liquidity, etc

[Author]

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